Structured finance transparency stumbles over legal conflict

Fri Feb 1, 2013 10:56am EST

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LONDON, Feb 1 (IFR) - European originators risk their securitisations being struck off the ECB's register of eligible collateral thanks to legal concerns about contracts with the European DataWarehouse (ED), the market infrastructure designed to promote transparency by providing loan-level data.

The Association for Financial Markets in Europe (Afme) has asked the ECB whether it could be flexible about its deadline for data submission and what sanctions would apply to originators that missed the deadline, according to a senior securitisation source at an Afme member institution.

Afme made the request because it anticipated that legal or compliance issues with the original ED contract could make its members miss the deadline.

These issues were largely about the extra liabilities which could be created by submitting the data to the ED. Originators were concerned this liability could go beyond the representations and warranties already in deal documentation.

ED has clarified that submitting loan level data should not create additional liabilities for originators, but negotiations are progressing between originator legal departments and ED, which wants a standard contract between sellers and the ED.

There have also been discussions about data protection, centred on whether ED would transfer any data, particularly about company details, to non-European Economic Area countries.

NO ELIGIBILITY

The big concern for member institutions is that their ABS collateral will cease to be ECB-eligible if they do not sign contracts and submit loan-level data in time. The ECB deadline for deals is either one month after the first interest payment date following January 3, or the end of March, whichever is sooner.

The ECB has not said whether deals can remain eligible after this point. Current market understanding suggests it will be on a deal-by-deal discretionary basis.

Once legal issues are dealt with, uploading deal information should be straightforward if originators have it ready to go. The ED is uploading around 20 deals a day to its database, and can accelerate this process if needed. The total universe of ECB eligible ABS tranches stands at 1140.

Originators have to pay an EUR8k one-time registration fee, plus a EUR6k annual maintenance fee. These levels are halved for non-ECB securities, though the work is the same for the European DataWarehouse.

Institutional investors can get direct access to the data for EUR500 per year, and several of the larger investors have already signed up. (Reporting By Owen Sanderson, editing by Julian Baker)

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